11. Suppose 10-year T-bonds have a yield of 5.50% and 10-year corporate bonds yield 6.75%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds?*

a) 1.00%

b) 1.20%

c) 1.32%

d) 1.45%

e) None of the above

12. Zoom Corporation's 5-year bonds yield 7.30% and 5-year T-bonds yield 4.10%. The real risk-free rate is r* = 2.5%, the default risk premium for Zoom's bonds is DRP = 1.90% versus zero for T-bonds, the liquidity premium on Zoom's bonds is LP = 1.3%, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) 0.1%, where t = number of years to maturity. What is the inflation premium (IP) on all 5-year bonds?*

a) 1.20%

b) 1.32%

c) 1.45%

d) 1.60%

e) None of the above